A PROGRAM FOR T ELCO
C OMPANIES IN W ISCONSIN
It’s a big state.
Someone has
to provide the
phone service
for 5.5 million
talkative folks.
L AND L INES ARE IN TROUBLE
US Phone Landlines
Per 100 Population
US Statistical Abstract
C REATIVE D ESTRUCTION

Monopolies have become competitive

Cable is muscling in on phone companies

Phone companies are fighting back with TV

Both are offering the internet

Wireless is stealing from both

You have to offer many services to survive
C ELL P HONES TAKING O VER
Annual
Household
Spending
on
Telephone
Service
Y OU HAVE TO OFFER EVERYTHING
T HE

Adding
products
boosts
revenue AND
improves the
retention rate
of land line
customers
EFFECT OF BUNDLING
Every additional product that you add improves
loyalty and reduces churn by 25%.
TO KEEP SUBSCRIBERS , BUILD
A M ARKETING DATABASE
A database is
more than a list
of subscribers
It is a tool to use
to retain
subscribers and
to sell them
additional
products
M ARKETING D ATABASE FED
FROM O PERATIONAL D ATABASE
The
Marketing
Database
can be
outsourced
to a vendor.
Advantage:
keep the
costs down,
and control
what he
does.
Appended
Data
This is your in house
billing database
Operational
Database
Sales, shipments, payments
Transactions
General
Ledger
Model
Scores
RFM &
Lifetime Value
Marketing
Database
Marketing
Communications
Promotions
Surveys &
& Responses
Preferences
D ETERMINE THE LIFETIME
VALUE OF YOUR SUBSCRIBERS
We are looking
at the career of
60,000
subscribers over
a three year
period.
Land Line Customer
Customers
Churn Rate
Retention Rate
ARPU
Revenue
Year
1
60,000
0.75%
91.0%
$41.00
$29,520,000
Year
2
54,600
0.73%
91.2%
$41.50
$27,190,800
Year
3
49,817
0.71%
91.5%
$42.00
$25,107,788
The lifetime
profit from each
of the 60,000 is
$96.33
CCPU - Cash Cost per User
CPGA - Cost per gross add
Total Cost
$18,720,000
$9,000,000
$27,720,000
$17,035,200
$15,542,916
$17,035,200
$15,542,916
To beat that we
have to improve
something.
Gross Profit
Discount Rate
Net Present Value Profit
Cumulative NPV Profit
Lifetime Value
$10,155,600
1.11
$9,149,189
$10,949,189
$54.75
$9,564,872
1.15
$8,317,280
$19,266,469
$96.33
$1,800,000
1.00
$1,800,000
$1,800,000
$9.00
W HAT CAN WE DO TO KEEP
THEM ?

Communicate
with them often

Put them on
automatic
paper-free
billing

Sell them a
second product:
DSL, TV
E FFECT
Churn rate down
ARPU Up
CCPU up
CPGA up
Revenue up
Lifetime value
way up.
OF ADDING
DSL
Land Line Customer
With Broadband
Customers
Churn Rate
Retention Rate
ARPU
Revenue
Year
1
60,000
0.70%
91.6%
$76.00
$54,720,000
Year
2
54,960
0.68%
91.8%
$76.50
$50,453,280
Year
3
50,475
0.66%
92.1%
$80.00
$48,456,253
CCPU - Cash Cost per User
CPGA - Cost per gross add
Total Cost
$33,120,000
$15,000,000
$48,120,000
$30,337,920
$27,862,346
$30,337,920
$27,862,346
$20,115,360
1.11
$18,121,946
$24,721,946
$123.61
$20,593,908
1.15
$17,907,746
$42,629,692
$213.15
Gross Profit
Discount Rate
Net Present Value Profit
Cumulative NPV Profit
Lifetime Value
$6,600,000
1.00
$6,600,000
$6,600,000
$33.00
DSL B OOSTS P ROFITS
Land Line Customer
Without DSL
With DSL
Increase
With 60,000 Subscribers
Year
1
$9.00
$33.00
$24.00
$1,440,000
Year
2
$54.75
$123.61
$68.86
$4,131,827
Year
3
$96.33
$213.15
$116.82
$7,008,967
A DDING TV:
T HE TRIPLE PLAY
The LTV has
gone down.
Why?
It is expensive
to add TV -much more
than to add
DSL.
And, the churn
rate has gone
up? Why?
Competition
from Cable and
Satellite.
Land Line Customer
Broadband & TV
Customers
Churn Rate
Retention Rate
ARPU
Revenue
Year
1
60,000
1.10%
86.8%
$131
$94,320,000
Year
2
52,080
1.05%
87.4%
$141
$88,119,360
Year
3
45,518
1.00%
88.0%
$151
$82,478,471
CCPU - Cash Cost per User
CPGA - Cost per gross add
Total Cost
$58,320,000
$72,000,000
$130,320,000
$50,621,760
$44,243,418
$50,621,760
$44,243,418
Gross Profit
Discount Rate
Net Present Value Profit
Cumulative NPV Profit
Lifetime Value
($36,000,000)
1.00
($36,000,000)
($36,000,000)
($180.00)
$37,497,600
1.11
$33,781,622
($2,218,378)
($11.09)
$38,235,053
1.15
$33,247,872
$31,029,494
$155.15
TV IS NOT A WORLD BEATER
Land Line Customer
With Landline Only
With DSL and TV
Increase
With 60,000 Subscribers
Year
1
$9.00
($180.00)
($189.00)
($11,340,000)
Year
2
$54.75
($11.09)
($65.84)
($3,950,270)
Year
3
$96.33
$155.15
$58.82
$3,528,907

There is more competition with TV: Cable,
Satellite, and over the air.

But TV and Wireless are important ways of
staying in the game and keeping your customers.

The main way to win: communicate often.
W HY COMMUNICATION IS
VITAL

All Wisconsin Telcos have additional services to
sell.

All have churn problems.

Solution: set up regular e-mail communications
with all subscribers.

Use those communications to sell more services,
and keep from losing the subscribers you have
now.
E- MAILS : L OW C OST S ELLING
E- MAIL – VERSATILE AND
INEXPENSIVE
F IRST STEP :
A UTOMATIC B ILL PAYING
“Stop by
or call us”
You cannot do
this on line.
What is the
benefit to the
subscriber?
YOU CANNOT SIGN UP
ON LINE IN W ISCONSIN
“Visit
or call
our
office”
S EE HOW AT&T
D OES A UTO B ILL PAYING
W HY AT&T AND V ERIZON
SEND E - MAILS
Automatic Bill
Paying is the
entry point for
monthly e-mails
that promote
additional
products.
This is why they
pay you $10 or
$15 for signing
up.
S UPPOSE W ISCONSIN T ELCOS
USED A COOP EMAILING SERVICE

One company could provide online bill paying
service application service with a link on each
Telco website.

Each subscriber would get a weekly e-mail from
his Telco, with local news, sports news, and what
is on TV this week, plus info about Telco
products.

A coop e-mail and text mail service might reach
most of the households of WSTCA members with
news and promotions from their local Telco.
E ACH T ELCO GETS THEIR
OWN E - MAIL SERVICE
W HAT DOES IT COST TO SEND
E - MAILS TO SUBSCRIBER HOMES ?

52 e-mail campaigns per year to for 20 Telcos
with 6,000 subscribers per Telco.

Cost $10.00 per thousand. Cost per Telco per
year – 20 companies participating, perhaps
$3,120 per year for the delivery plus $12,000 per
year for the part time editor.

What would be the benefits?
A SSUMPTIONS

Assume that 20 Telcos participate.

There are 52 e-mail campaigns per year.

There is a monthly contest for e-mail subscribers.
One winner of $5,000 per month. To enter: click
on an entry box in the e-mail. Nothing to buy.

Each Telco designs their own e-mails. Each has
one part time editor @ $1000 per month
developing e-mail copy.
W HAT WOULD BE IN THE E MAILS ?

What sports, events and movies would be on TV this
week – time and channel

Local results of local sports teams.

Video of local sports supplied by teams, and their
supporters. Local to the Telco area.

Every opened e-mail is an automatic entry in the
monthly $5,000 contest. Nothing to buy,

Ads from local merchants

Ads for Telco products
B ENEFITS
OF THE E - MAILS

Assume each Telco has 6,000 e-mail subscribers

The open rate is 30% because of the $5,000 prize
per month.

One half of one percent of the e-mails result in a
sale of a Telco product (DSL or TV or PC) with an
annual revenue per product of $419.40

Note, average sales due to e-mails from other
companies varies from 0.5% to 3%.

Resulting sales per Telco per year $196,279
D ETAILS OF THE E - MAIL
PROGRAM
Subscribers
E-mails/Sub
E-mails
Open Rate
Opened E-mails
Sales per opened e-mail
Saes per year
Revenue per sale
Annual Revenue New Sales
Annual Profit @ 40%
Cost per thousand e-mails
E-mail Delivery Cost per Year
Part time e-mail creator / year
Share of $5,000 prizes
Total Cost
First Year Profit after costs
Three year profit from year 1
Two year profit from Year 2
One Year Profit from Year 3
Total three year profit
6,000
52
312,000
30%
93,600
0.50%
468
$419.40
$196,279
$78,512
$10
$3,120
$12,000
$3,000
$18,120
$60,392
$181,175
$120,783
$60,392
$362,350
Assume a phone company with
6,000 subscribers who sign up for
e-mails.
Assume 20 Telcos sign up as
members to send emails
Assume a part time local e-mail
editor who gets $1,000 per month
for creating the four e-mails sent
out by the Telco
Over three years the e-mail
marketing program could produce
total profits of $362,350 per Telco
S ERVICES PROVIDED BY THE
E - MAIL VENDOR COMPANY

Link to sign up subscribers and auto bill payers for
each member Telco. Telcos do their own billing, and
receive all revenue directly from subscribers.

Maintain a central database of subscribers for each
Telco. Send e-mails from this database. Telcos can
access DB on line and do segmentation. Use cookies
so Telco websites and e-mails are personalized.

Shopping cart in e-mails so subscribers can buy
services from Telcos on line.

Deliver all e-mails for the Telcos.

Provide a template to each Telco for them to enter
their own content for the e-mails.
H OW
TO GET STARTED

WSTCA enlists members in the project. Get at
least 20 to sign up. Set up an e-mail corporation
with each Telco an owner.

WSTCA drafts an RFP for a company to provide
the services.

Selected vendor creates software for each Telco
website to enlist auto bill payers, subscribers,
and shopping carts to sell Telco services. Sends
both e-mails and cell phone text content. Creates
the monthly contest.
G ET
THE BOOKS
Arthur.hughes@dbmarketing.com
Arthur
Middleton
Hughes
VP The
Database
Marketing
Institute, Ltd.
954 767 4558